California Senate Bill 800

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This article first appeared in the PB June 2003 issue of Pro Builder.

SB800, effective Jan. 1, 2003, establishes a mandatory process prior to the filing of certain types of construction defect suits. The bill applies whenever there are defects alleged by a homeowner in new residential construction, but does not apply to condominium conversions.

The bill provides that any construction defect action against a builder, subcontractor, product manufacturer or design professional will be governed by the standards set forth in SB800. (Note that the existing Certificate of Merit requirements for design professionals are not abrogated by the bill and apply in the event a lawsuit is filed after completion of the SB800 process.).

The bill attempts to specifically define what constitutes a "defect" for virtually all aspects of a residential building and its appurtenant systems. Most of the definitions for defective construction concentrate on water intrusion issues (requiring that building systems such as windows, doors, roofs and plumbing "shall not leak") and also provide that the defects "shall not materially impair the use of the structure by its inhabitants." The statutory process outlined by must be exhausted prior to the filing of a lawsuit.

A Homeowner initiates the process by first submitting a written claim to Builder's designated agent. If no offer to repair the alleged defects is made by the Builder, or if the Builder otherwise fails to adhere strictly to the process, the Homeowner may proceed with the filing of a lawsuit.

As illustrated in the accompanying time-line (as well as in Attachment #2) the following hypothetical schedule assumes that a Homeowner has notified the Builder of alleged defects on January 3, 2003.

It is also assumed (for purposes of simplicity and to illustrate the maximum duration of the statutory pre-litigation process), that each event takes place on the last day of the period allowed under the bill. Homeowner submits claim to Builder on January 3, 2003.

Builder must "acknowledge" claim by January 17, 2003.

If Builder sends Homeowner a written acknowledgment on January 17, it then has until January 31, 2003 to complete its preliminary inspection.

Builder has until February 3, 2003 to request a second inspection.

This second inspection must be completed within 40 days, i.e., by March 15, 2003.

Builder then has until April 14, 2003 to make its offer to repair some, all or none of the alleged defects and to suggest a contractor to perform the work.

Homeowner may consider Builder's offer until May 14, 2003. Should Homeowner object to the repair contractor designated by Builder, Builder has until June 18, 2003 to provide Homeowner with a list of three alternative contractors. [Builder may also make a final, "non-invasive" inspection, ostensibly to facilitate the involvement of the repair contractor, by June 3, 2003.].

Assuming Homeowner agrees to a repair contractor on June 18, 2003 repairs must commence by July 2, 2003. "Every effort" must be made to complete repairs by October 30, 2003. Total duration of illustrated process: 300 days.

If a Homeowner does not file a written claim with Builder in advance of filing suit, SB800 provides for a statutory bar to the action and a court would have no authority to hear the case.

The case would be dismissed without prejudice, meaning it could be re-initiated at a later time, after proper exhaustion of the SB800 process. If the Builder has not strictly adhered to the process, or if the repairs are not suit or initiate other legal proceedings (i.e., arbitration). The Homeowner need not follow the process for matters not covered by the legislation (i.e., alleged defects in products, such as washers/dryers, etc., which have been manufactured completely offsite).

All defects discovered after the process is completed would require the initiation of a new SB800 procedure and the Builder is not responsible for repairs of defects which it had no notice of or opportunity to repair. If the statute of limitations has already run when the defect is discovered, the process cannot be initiated and no lawsuit may be brought.

If the process is initiated prior to the running of the statute, the statute will be extended to allow Homeowner and Builder to complete the process (see below).

If an action to enforce the bill's standards is initiated in court by a Homeowner, the fact that a repair effort was made may be introduced to the trier of fact, and evidence of the parties' conduct during the repair process may be introduced during a subsequent enforcement action.

Repair efforts by a Builder are not considered confidential and privileged settlement communications and may not be withheld from evidence on this basis. Civil Code Section 1375 (commonly referred to as the "Calderon" bill) sets up an analogous pre-litigation process for common interest development projects such as condominiums. The pre-trial process prescribed by Section 1375 is mandatory and involves a minimum 6-month period of information exchange and alternative dispute resolution ("ADR") sessions between the prospective litigants.

SB800 creates another, entirely separate, pre-litigation process that lasts for at least 101 days. Because it is entirely foreseeable that certain residential projects will fall within the ambit of both SB800 and Calderon, SB800 contains an express provision excusing compliance with Section 1375's provisions where the requirements of the two statutes are "substantially similar."

Liability would arise in spite of the Supreme Court's decision in Aas v.

Superior Court (2000) 24 Cal.4th 627 (which held that only those construction defects causing property damage are actionable under negligence and strict liability theories). Under SB800, it is not required that the "construction defects" enumerated in the legislation cause property damage, thereby amounting to a legislative veto of the Aas decision. Existing law provides that an action based on defects not apparent from a reasonable inspection ("latent" defects) must be brought no later than 10 years after "substantial completion" of the development or improvement.

Although SB800 maintains the 10-year statute of limitations for actions falling within the ambit of the bill, there are shorter time frames prescribed for certain types of defects (i.e., 1 year for noise transmission and irrigation system claims, 2 years for defective wood posts, 4 years for defective steel fences, 5 years for painting claims, etc.). Further, if the 10-year statute of limitations expires during the SB800 process, it will be extended for 100 days following completion of the repairs. The 10-year statute of limitations is also extended in the event a mediation occurs after completion of the repairs.

SB800 provides immunity from liability to third-party inspectors who provide, under contract with an applicant for a residential building permit, an "independent quality review" of residential plans and specifications.

This immunity would extend to any potential claimant except the person who retains the inspector, meaning only the person paying the inspector for his/her services could sue for negligence. A third-party inspector will be required to meet certain minimum experience requirements to qualify for the immunity, and will also be required to maintain a minimum of $2 million in liability insurance coverage.

A Builder is not released after completing repairs.

The bill presumes that a Builder warrants implicitly, in addition to any express warranties on the original construction, that the repairs will be reasonably adequate to restore the structure to the condition intended by its designers, and that the home will be reasonably habitable by its occupants.

Specifically, a Builder may not obtain a release or waiver of any kind in exchange for the repair work mandated by the bill. If the repairs fail before the statute of limitations runs, a Homeowner may still bring a lawsuit against the Builder. However, nothing in the bill prohibits a Builder from obtaining an enforceable release in exchange for a cash payment.

It requires Builders to provide homeowners with a minimum one-year express warranty covering the "fit and finish" of cabinets, mirrors, flooring, interior and exterior walls, countertops, paint finishes and trim. The bill also permits builders to exceed the warranty standards of the bill and provide homeowners with other more extensive warranties. If a Builder has complied with the bill's requirements and has completed a repair prior to the filing of an action by a Homeowner (and if there has been no previous mediation between the parties), the Homeowner is then required to request mediation in writing.

In the event that a mediation is undertaken at this point, any applicable statutes of limitation will be tolled.

SB800 also allows a Builder to pursue ADR as an alternative to its provisions. However, a Builder may not pursue ADR as an alternative to SB800 and then also insist on compliance with the SB800 process after completion of ADR. SB800 provides that if the Builder intends to hold a subcontractor, design professional, or material supplier, including an insurance carrier, warranty company, or service company, responsible for its contribution for any construction defects, the builder shall provide notice to that person or entity sufficiently in advance to allow them to inspect the alleged defects and to participate in the repair process.

Despite its lofty intentions, SB800 will probably not result in an appreciable decrease in the amount of construction litigation in California, and may actually cause additional litigation over its meaning and intent. Perhaps more importantly, a Builder who performs repairs pursuant to the SB800 process may not obtain a legally binding release, thus raising a potential disincentive to perform such work.

Serious insurance coverage questions may also arise with respect to any voluntary repair work performed by a Builder pursuant to SB800, and for construction defects which do not result in property damage.

Further, depending upon the complexity of the issues involved, the time deadlines set forth in SB800 may not prove workable or realistic under the circumstances. In sum, it will probably be many years before the final chapter on SB800's effectiveness in actually decreasing construction defect litigation will be written. However, given the far-reaching nature of the legislation and its attendant ambiguities and complexities, it is probably a safe bet that residential construction defect claims will continue to be a hotly litigated area in the foreseeablefuture.

For more information regarding SB800 and its implications on construction defect litigation, please contact:. GORDON & REES, LLP. GORDON & REES, LLP275 Battery Street 20th FloorSan Francisco, CA 94111(415) 986-5900 / 986-8054 (fax)gordonrees.com. A top California lawmaker is working to create a new program that will help families afford home purchases in the most expensive markets across the state.

The NAHB is seeking support from President Biden amid grueling price volatility and supply chain disruptions delaying new home construction.

NAHB Policy Briefing | NAHB opposes changes to Section 45L Energy Efficient Home Credit; supply of 'missing middle' moderate-density housing isn't sufficient to meet demand. In 2002, after an adverse decision by the California Supreme Court denying homeowners the right to sue for construction defects that had not yet caused actual damage to other property or parts of a home, the California General Assembly adopted the “Right to Repair Act” (Civil Code §§ 895 - 945.5), often referred to as SB 800.

“The Right to Repair Act. “The Legislature enacted the Right to Repair Act to “‘specify the rights and requirements of a homeowner to bring an action for construction defects , including applicable standards for home construction, the statute of limitations, the burden of proof, the damages recoverable, a detailed prelitigation procedure, and the obligations of the homeowner.’ (Legis.

Counsel's Dig., Sen. 800 (2001–2002 Reg. Sess.).)” (Anders v. Superior Court (2011) 192 Cal.App.4th 579, 585 [121 Cal.

  1. 3d 465] (Anders). .” (Emphasis added). The McCaffrey Group, Inc. Superior Court (2014) 224 Cal. 4th 1330, 1342-1343. The purpose of the Right to Act was abolish parts of the “Economic Loss Doctrine,” and to establish rights and procedures which allow a homeowner in a new development to recover for construction defects even where there is no actual property damage to other property yet, and where the only “defect” is the bad work or defective product itself, which bad work might not cause actual property damage to other property until years after the otherwise applicable Statutes of Limitation and Statute of Respose in Code Civil Proc.
  2. §* 337.1, 337.15 have expired. The economic loss rule. In Aas, supra, 24 Cal.4th at page 635, the Supreme Court considered whether a group of plaintiff homeowners could “recover in negligence from the entities that built their homes a money judgment representing the cost to repair, or the diminished value attributable to, construction defects that have not caused property damage.” In answering this question in the negative, the Aas court relied on the economic loss rule, which it described as “settled law limiting the recovery of economic losses in tort actions … .” (Id.
  3. 632.) The Aas court noted that in the seminal case of Seely v. White Motor Co. (1965) 63 Cal.2d 9 [45 Cal. 17, 403 P.2d 145] (Seely), the court explicated the rationale for the economic loss rule: “‘The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss,’ we wrote, ‘is not arbitrary and does not rest on the “luck” of one plaintiff in having an accident causing physical injury.

“The Aas court noted that under California tort law, courts had applied the economic loss rule in construction defect cases to preclude the recovery of purely economic losses, i.e., those not accompanied by either property damage or physical injuries: “Speaking very generally, tort law provides a remedy for construction defects that cause property damage or personal injury.

Focusing on the conduct of persons involved in the construction process, courts in this state have found such a remedy in the law of negligence. omitted.] Viewing the home as a product, courts have also found a tort remedy in strict products liability, [fn. omitted] even when the property damage consists of harm to a sound part of the home caused by another, defective part.

omitted.] For defective products and negligent services that have caused neither property damage nor personal injury, however, tort remedies have been uncertain.

Any construction defect can diminish the value of a house. But the difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone.

[Citation.] This general principle, the so-called economic loss rule, is the primary obstacle to plaintiffs' claim.

” (Aas, supra, 24 Cal.4th at pp. SB 800 effectively reversed this Aas decision and the “economic loss rule” in part and in limited instances for home developments constructed in and after 2003 by a “Builder”, which the Act defines as meaning a regular developer of that home and other homes for sale to the public.

“The Right to Repair Act. “In response to the holding in Aas, the Legislature enacted the Right to Repair Act. The Act establishes a set of standards for residential construction, and provides tort liability for entities that fail to meet the standards.

Greystone Homes, Inc. (2008) 168 Cal. 4th 1194, 1209-1211. To minimize the costs, risks and time delays of regular construction defect litigation, the Act provides in Civil Code §§ 910-938 for a pre-litigation, non-adversarial, private procedure that is a precondition to litigation regarding alleged violations of the Standards for Residential Construction in Civil Code ྷ 896.

The Builder or Developer must give homebuyers notice of these procedures and rights in their sale and title documents, or the Builder waives the right to enforce these procedures or stay litigation pending the Right to Repair non-adversarial pre-litigation procedures.

However, even if the Builder fails to give homebuyers notice of the Right to Repair Act on the sale of the home, the Statues of Limitations and other limited exceptions to the Economic Loss Rule in SB 800 still apply to buyers.

The SB 800 procedure requires written notice to the Builder in a specific manner of the violation of the specific Standards for Residential Construction defined in Civil Code § 896, inspection procedures, and gives the Builder the right to offer to repair violations of the Standards, before the property owners may commence any suit for those same violations of the Standards.

“The chapter at issue here, division 2, part 2, title 7, chapter 4 of the Civil Code (Chapter 4), prescribes nonadversarial prelitigation procedures a homeowner must initiate before bringing a civil action against the builder for alleged construction defects. (§§ 910–938.) The homeowner is required to provide the builder with written notice of the claim that the construction of his or her residence violated any of the standards set forth in chapter 2 of the Act, and must “describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation.

” (§ 910, subd. (a).) Once the builder has received the claim, it has 14 days to provide written acknowledgment of the claim and another 14 days to inspect and test the claimed defects . (§§ 913, 916.) The builder has an additional 40 days to conduct a second inspection or testing.

“ Within 30 days of the last inspection or testing, the builder may offer to repair the violation, set a reasonable completion date, and compensate the homeowner for all recoverable damages. (§ 917.) The homeowner has 30 days to either authorize repairs as proposed or request repairs by a different contractor. (§ 918.) The repairs must be commenced within 14 days of acceptance, done “with the utmost diligence,” and “completed as soon as reasonably possible,” with every effort made to complete them within 120 days.

“The builder's offer to repair must be accompanied by an offer to mediate the dispute if the homeowner chooses; the mediation is limited to four hours, except as otherwise mutually agreed, before a nonaffiliated mediator selected and paid for by the builder, and must occur within 15 days after the request to mediate is received.

“[I]f the builder fails to acknowledge receipt of the claim, elects to not go through the process set forth in Chapter 4, fails to request an inspection within the time specified, fails to make an offer to repair, fails to complete the repair within the time specified, or fails to “strictly comply with this chapter within the times specified,” the homeowner is released from the requirements of Chapter 4 and may proceed with the filing of an action.

(§§ 915, 920, 925, 930.) The standards set forth in the other chapters of the Act, however, continue to apply to the action. (§§ 915, 920, 925, 930.) . The McCaffrey Group, Inc. Superior Court , supra, 224 Cal. 4th 1330, 1343-1344. The Builder may establish alternate, but equivalent, pre-litigation procedures to those in SB 800.

“The builder has the option of contracting for an alternative nonadversarial prelitigation procedure in lieu of the statutory procedure.

Section 914 provides: “(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title.

.” (All Emphasis added). The McCaffrey Group, Inc. Superior Court ,supra, 224 Cal.

“(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title.

A builder may attempt to commence nonadversarial contractual provisions other than the nonadversarial procedures and remedies set forth in this chapter, but may not, in addition to its own nonadversarial contractual provisions, require adherence to the nonadversarial procedures and remedies set forth in this chapter, regardless of whether the builder's own alternative nonadversarial contractual provisions are successful in resolving the dispute or ultimately deemed enforceable.

At the time the sales agreement is executed, the builder shall notify the homeowner whether the builder intends to engage in the nonadversarial procedure of this section or attempt to enforce alternative nonadversarial contractual provisions.

If the builder elects to use alternative nonadversarial contractual provisions in lieu of this chapter, the election is binding, regardless of whether the builder's alternative nonadversarial contractual provisions are successful in resolving the ultimate dispute or are ultimately deemed enforceable.

(b) Nothing in this title is intended to affect existing statutory or decisional law pertaining to the applicability, viability, or enforceability of alternative dispute resolution methods, alternative remedies, or contractual arbitration, judicial reference, or similar procedures requiring a binding resolution to enforce the other chapters of this title or any other disputes between homeowners and builders.

Nothing in this title is intended to affect the applicability, viability, or enforceability, if any, of contractual arbitration or judicial reference after a nonadversarial procedure or provision has been completed.” (All emphasis added).

Civil Code § 914. “Section 914, subdivision (a), permits the builderto elect to engage in its own nonadversarial contractual procedure in lieu of the statutory procedure.

It requires the builder to notify the home buyer, at the time the sales agreement is executed, which set of procedures it elects to use.

.” (Emphasis added).

Superior Court (2011) 192 Cal. And, in the absence of such other - “optional” - alternative, contractual pre-litigation procedures which a Builder is permitted to adopt prior to the sale of a property,. “(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title .

.” (Emphasis added). Civil Code § 914(a). “[T]he Right to Repair Act [itself] “‘specif[ies] the rights and requirements of a homeowner to bring an action for construction defects”, and “division 2, part 2, title 7, chapter 4 of the Civil Code (Chapter 4), prescribes nonadversarial prelitigation procedures a homeowner must initiate before bringing a civil action against the builder for alleged construction defects.

(§§ 910–938.) ” (Emphasis added).

The McCaffrey Group, Inc. Superior Court , supra, 224 Cal. 4th 1330, 1342, 1343. If the property owner does not comply with the mandatory, Non-adversarial, Pre-Litigation procedures in the statute, Civil Code §§ 910-938, the Builder may move to stay or dismiss any lawsuit the homeowners may have already filed. “(b) If the claimant [homeowner] does not conform with the requirements of this chapter, the builder may bring a motion to stay any subsequent court action or other proceeding until the requirements of this chapter have been satisfied.

The court, in its discretion, may award the prevailing party on such a motion, his or her attorney's fees and costs in bringing or opposing the motion.”. Civil Code § 930(b). A homeowner/buyer who files suit has the burden of proof on such a motion to prove that he or she has complied with the non-adversarial prelitigation procedures in Civil Code §§ 910-938, or show it is subject to some exception thereto.

Standard Pacific Corp. Superior Court (2009) 176 Cal. 4th 828, 834; Darling v. Superior Court (1st Dist. 4th 69, 75; The McCaffrey Group, Inc. Superior Court ,supra, 224 Cal. The pre-litigation SB 800 procedures require the Builder and homeowner to take several specific steps by specified and very short deadlines:. “[O]nce the builder has received the claim, it has 14 days to provide written acknowledgment of the claim and another 14 days to inspect and test the claimed defects.